Partnership

Dissolution

Medium

common

At the time of dissolution of a firm, the Bank Loan was Rs. 60,000 which was paid by Bhuvan (a partner) along with one-year interest at 6 %, which journal entry will be passed in the books of the firm :-

Realisation A/c Dr. 63,600

To Bhuvan's Capital A/c 63,600

Bank Loan A/c Dr. 63,600

To Bank A/c 63,600

Realisation A/c Dr. 60,000

To Bhuvan's Capital A/c 60,000

Realisation A/c Dr. 60,000

Interest on Bank Loan A/c Dr. 3,600

To Bhuvan's Capital A/c 63,600

✅ Correct Option: 1

At the time of dissolution, when a partner pays a firm's liability from personal funds, the treatment involves:

Calculation of total payment:

Bank Loan = Rs. 60,000

Interest for 1 year at 6% = $60,000 × \frac{6}{100} × 1$ = Rs. 3,600

Total amount paid by Bhuvan = Rs. 60,000 + Rs. 3,600 = Rs. 63,600

Journal Entry:

During dissolution, all external liabilities (including any interest payable) are settled through the Realisation Account. When a partner pays a liability from personal funds, the firm becomes indebted to that partner.

Therefore, the complete payment (principal + interest) is recorded as:

Realisation A/c Dr. 63,600

To Bhuvan's Capital A/c 63,600

This entry reflects that:

Realisation Account is debited as the liability has been paid off (all payments of liabilities are debited to Realisation A/c)
Bhuvan's Capital Account is credited because he paid from his personal funds, making him a creditor of the firm for this amount

The entire amount of Rs. 63,600 is treated as a single payment of liability through Realisation Account, not split between principal and interest separately.

Correct Option: 1

2025: 16 May Shift 1

While settlement of Accounts, what should be the order of application of assets of Firm

(A) In paying the debts of the firm to the third parties

(B) In paying to each partner proportionately what is due to him on account of capital

(D) In paying each partner proportionately what is due to him/her from the firm for advances as distinguished from capital (i.e. partner's loan)

Choose the correct answer from the options given below:

2025: 27 May Shift 2

Anubha looked after the dissolution work for remuneration of Rs. 8,500 and agreed to bear dissolution expenses upto Rs. 6,000. Actual expenses paid by her were Rs. 7,600. In this case,

(A) Realisation A/c is debited by Rs. 10,100

(B) Anubha's Capital A/c is credited by Rs. 9,600.

(D) Anubha's Capital is credited by Rs. 10100.

Choose the correct answer from the options given below:

2025: 24 May Shift 1

In case of dissolution of partnership firm, any liability assumed/paid by a partner is shown on ........?

2025: 24 May Shift 1

Dissolution of a firm takes place on the happening of certain contingencies. Choose them from the following :

(A) By the death of a partner

(B) By the adjudication of a partner as an insolvent

(D) If constituted for a fixed term, by the expiry of that term

Choose the correct answer from the options given below:

2025: 3 June Shift 1

When a partnership firm is being dissolved, the private property of any partner shall be applied first, in payment of __________ and the surplus, if any, may be utilised for payment of __________, in case the firm's liabilities exceed the firm's assets.

2026: 21 May Shift 1

Dissolution of a Firm means:

At the time of dissolution of a firm, the Bank Loan was Rs. 60,000 which was paid by Bhuvan (a partner) along with one-year interest at 6 %, which journal entry will be passed in the books of the firm :-

Solution

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